MEXICO CITY - Grupo Oplex SA de CV of Mexico City is forming a joint venture in Mexico with a Spanish plastics foam converting company. The Mexican company reached a formal agreement in early May with Termocel SA of Barcelona to set up a 50/50 joint company. It will produce converted foam products for automotive, appliance and computer markets in Mexico, said Oplex's marketing director Javier Kassel.
The venture will invest around US$1 million initially to equip a 30,000-square-foot plant in existing buildings located at Oplex's Aeroplex auto parts complex in Tlalnepantla, north of the Mexican capital, Kassel said.
It will buy PVC and other foam material, much of it from U.S. suppliers, and make foam-backed, self-adhesive tapes, die-cut foam gaskets, filters and other converted products.
The firms plan to launch the new venture in January and sales are expected to reach around $2 million in the first year. The partners hope to expand the company to achieve annual sales of $8.5 million in five years.
To begin with, the automotive market will represent around 80 percent of the new plant's sales.
``This company [Termocel] is very similar to ours. It is small to medium-size, and they run the business pretty much as we do - hands-on, not [a] very sophisticated, large organization,'' Kassel said.
Termocel, with about $6.8 million in annual sales, has about 600 customers and produces 4,000 different foam products. Around 40 percent of its current business is with the automotive sector, with appliances representing another big share, Kassel said.
The Barcelona firm has sought a joint venture partner in Mexico for several years and was introduced to Oplex two years ago through contacts at Mexico's trade and industry ministry Secofi and foreign development bank Bancomext.
Kassel reckons there is a wide-open market for the converted foam products worth around $32 million. Existing competition is limited, he says.
``There are a lot of garage shops that make maybe one or two parts,'' Kassel said.
Kassel said the new venture will help Oplex compensate for a reduction in its traditional auto and other products in Mexican markets.